Swiss Investment Fund for Emerging Markets (SIFEM) – Least Developed Countries (LDC) Risk Support


To accelerate Swiss investments into Least Developed Countries (LDCs), this programme will establish a co-operation between SDC and the Swiss Investment Fund for Emerging Markets (SIFEM). The co-operation is built on the provision of first loss guarantees, financed by SDC, for SIFEM investments benefitting local Small and Medium Enterprises in LDCs. This innovative programme will also build capacities in local financial markets and help to mobilize private and public sector funds for fulfilling the Sustainable Development Goals.

Country/region Topic Period Budget
Global
Employment & economic development
Employment creation
Informal banking & insurance
SME development
10.03.2020 - 31.12.2027
CHF  14’200’000
Background

Today, only a small portion of Foreign Direct Investment (FDI) flows into Least Developed Countries (LDCs). Switzerland’s Strategy for International Co-operation 2021–2024 foresees to complement official development assistance (ODA) by catalysing additional private-sector investments on the scale needed for the achievement of the Sustainable Development Goals (SDGs) – including in LDCs, other low-income countries and other difficult or fragile contexts (see annex 8). This shall allow reducing poverty and increasing stability. It is in Switzerland’s interest to position itself as a pioneer for blended finance in LDCs, and Switzerland’s strong financial and impact investment sector represents a clear value added. SDC thus identified a strengthened cooperation with the Swiss Investment Fund for Emerging Markets (SIFEM) – based on the organisation’s proven track-record – as a strategic choice. SIFEM is Switzerland’s Development Finance Institution (DFI) and is owned and capitalised by the Swiss Confederation. Control and oversight are ensured by SECO.

The Federal Council recently approved the strategic objectives for SIFEM for the years 2021 – 2024. They foresee an increase of SIFEM’s activities in LDCs up to at least 12%, with an overall rate of return of 3% on its investment portfolio. The strategic objectives refer to the first loss guarantee scheme presented in this proposal. Furthermore, SIFEM, together with SECO, has been mandated to embark on discussions on how to undertake additional investment activities in LDCs investing SDC’s own funds.

The SDC guarantees of CHF 12.81 million will trigger investments by SIFEM in LDCs of at least CHF 25.62[1] million. In addition, investments of SIFEM are expected to support third-party investors to commit an additional investments of about CHF 51 million towards LDCs assuming a twofold leverage ratio in LDCs (conservative estimate).

 

[1] Assuming that SDC will provide guarantees with the maximum risk absorption level of 50 % (conservative estimate).

Objectives Improved well-being of women and low-income households through the provision of finance to small and medium sized enterprises (SMEs) in Least Developed Countries.
Target groups

Financial intermediaries

Small and medium enterprises (SMEs) in the LDCsand other eligible countries (list in annex 8)

Women and low-income households

Medium-term outcomes

1. SIFEM increases its investment share in LDCs, other low-income countries and other difficult or fragile contexts from 10 % to at least 12 % by 2024.

2. Financial intermediaries in LDCs are providing increased financings to SMEs in order to ensure their financial viability, create jobs and provide basic services.

3. SIFEM strengthens the local financial ecosystem.

Results

Expected results:  

4 SIFEM investments, covered by a first-loss guarantee provided by SDC in LDCs as well as other eligible countries.

Provision of specific technical assistance support to borrowing companies.

Established co-operation between SDC and SIFEM.


Results from previous phases:   Currently, SIFEM has invested around 10 % of its active investment commitments in LDCs.


Directorate/federal office responsible SDC
Credit area Development cooperation
Project partners Contract partner
Private sector
Swiss state institution
  • National State Institute SWISS
  • Swiss Private Sector


Coordination with other projects and actors Synergies with other SDC projects in the target countries are identified and strengthened at country level.
Budget Current phase Swiss budget CHF    14’200’000 Swiss disbursement to date CHF    776’558
Project phases Phase 1 10.03.2020 - 31.12.2027   (Current phase)